Greg Mills and Tim Hughes
Amid the controversy of power plays among South Africa’s political leadership, it is too easy to neglect the huge strides made by the country since 1994 not just in consolidating its democracy, but in addressing core socio-economic issues.
Comparisons with other emerging markets in East Asia not only bear this out, but highlight the importance of leadership in coping with the demands posed by globalisation and development needs. That South Africa’s successes are seldom acknowledged is a reflection of three issues.
First, the international community often displays an unhealthy dose of Schadenfreude towards Africa. Too many appear to be waiting for or at worst willing South Africa to fail along the lines of much of post-colonial Africa.
Second, South Africa’s emergence from apartheid isolation and entry into the global economy has occurred at a time when most developing countries have been struggling to cope with globalisation. Indeed, the Asian “miracle”, built as it was on the back of capital flows and trade volumes, faltered on the road to full global participation and competitiveness. And the global recession that followed the Asian crisis of 1997 dried up demand for commodities, with adverse implications for South Africa, Australia, Brazil, Canada, Russia, Chile and other resource-based economies.
At the time of the 1997 crisis, East Asian economies accounted for nearly one-quarter of global gross domestic product (GDP) and trade. Yet the currencies of the region’s tigers and dragons dramatically lost value, the Indonesian rupiah by 600% and Thailand’s baht 50% within 12 months. Growth rates also plunged, sending the global economy into shock, especially over emerging markets. Thailand’s economy slumped from 6,5% GDP growth in 1996 to zero in 1997 and -8% in 1998. Indonesia’s, which had expanded by 4,7% in 1997, fell to -13,2% in 1998.
It is a credit to South Africa’s financial and banking systems and its market fundamentals that it has been able to ride out this storm largely unscathed.
The third issue concerns the changing role of leadership and its relationship with internal sectors and external actors. In Asia leaders were largely able to excuse the absence of democracy and the practice of a not-so-benevolent authoritarianism on the basis of the “Asian Model”.
In post-crisis, new age globalisation, this is no longer possible, and indeed Asia shows how costly this approach may be in the long term. Yet the perception of contemporary South Africa is, at least from much of the outside, largely one of an increased blurring of the distinction between party, politics and the government. But given the refined state (if not always practice) of South Africa’s constitutional democracy, this is an issue that can be relatively easily repaired through effective leadership in the government, the opposition and civil society. Indeed, the stakes are too high to do otherwise.
East Asia has, for all of its recent woes, been through an exceptional period of economic prosperity, averaging 5,4% real GDP growth from 1965 to 1997, compared to sub-Saharan Africa’s decline of 0,2%. The reasons for its comparative success include a focus on people-centred development, policies that facilitated improvements in education, health standards and the rise of small- and medium-sized enterprises, and the use of infrastructure spending as a catalyst for growth.
Planning was important, but it was, to paraphrase economist Paul Krugman, “one part inspiration and several parts perspiration” in the mobilisation of capital and human resources. While government interventions were important, they were not critical. As one Taiwanese analyst noted: “The success of economic plans in Taiwan is that they are never carried out.”
It is sometimes argued that, in the age of globalisation, the market is more powerful than leadership. The latitude of the latter is, according to this argument, seriously limited. Yet the 1997 crisis and subsequent developments have highlighted the role of leadership and its importance to maintaining stability and growth, in at least two ways.
First, events have illustrated the importance of building the institutional foundations of development through democracy. As Philippe Ris has argued, the Asian crisis showed how “democratic societies … had a greater capacity to withstand the shock than countries ruled by authoritarian regimes”. Authoritarianism encouraged cronyism, exacerbated inefficiencies and distorted the market. Democracy is a necessary, but not necessarily sufficient, condition for success. For example, the staging in 1999 of Indonesia’s first election in four decades has not brought stability. Nor has this yet altered the web of cronyist military-business-familial linkages, which have for so long dominated Indonesia’s political economy.
Asia’s crisis has, secondly, also illustrated how important it is not to take the competency of politicians for granted. Conversely, it has demonstrated the importance of sound leadership to identify core problems and devise solutions, involving engagement with external institutions in the search for stability.
So much has been achieved in South Africa over the past seven years. It is too easy to ignore the tangible results of the democracy dividend. To build on this success, however, Pretoria has to develop a working model of “SA Incorporated” a social compact between the government, opposition, business and an increasingly estranged civil society. This could assist in managing perception and policy, but would only work if race and loyalty were not taken as factors shaping the willingness of stakeholders to engage. Such an approach could be a critical ingredient for a long, durable period of political stability and economic prosperity.
Globalisation is a two-way street. Economic integration offers protection against outside military threats. It offers benefits, exacts costs and demands performance, but largely ensures that countries and leaders get the economies they deserve. As the Economist noted: “Markets have restricted the ability of politicians to promise paradise to their constituents and lead them to hell.” But as Asia demonstrates, states are always vulnerable, particularly in the absence of internal dialogue and engagement by leadership.
Dr Greg Mills and Tim Hughes are respectively National Director and Parliamentary Liaison Officer at the South African Institute of International Affairs